Josh Kopelman, Entrepreneur While still an undergraduate at Wharton, Josh cofounded Infonautics Corporation with entrepreneur Marvin Weinberger. In 1996, Infonautics went public on the NASDAQ stock exchange. Josh left Infonautics to found Half.com in July of 1999, and led it to become one of the largest sellers of used books, movies and music in the world. Half.com was acquired by eBay in July 2000 in a stock deal valued at the time at more than $300 million -- and Josh remained with eBay for three years, running the Half.com business unit and growing eBay's Media marketplace to almost half a billion dollars in annual gross merchandise sales

In early 2004 Josh helped to found TurnTide, an anti-spam company that had created the world's first anti-spam router. TurnTide was acquired by Symantec just six months later for an estimated $28 million.

Five Rules of Investing for Success

Over the last several years I've made several angel investments in high-technology companies. To help me quickly screen through prospects, I've come up with a short list of success factors to rely on when considering new investments.

1. Reduced Market-Acceptance Risk When I was at Wharton, I remember learning that successful entrepreneurs try to find a new, untapped or underserved market. I disagree. I think the markets are extremely efficient - and there are so many smart entrepreneurs out there - so that if a market segment is "untapped" or "underserved", there typically is a reason why. That's why I try to find companies that offer a unique solution in an already large space -preferably in a frothy market where there's already lots of money and where "pain" is evident. In 1999 the fastest growing space on the Internet was e-commerce - and the biggest segment was books. Hence, Half.com addressed that market with a unique solution. In 2004 spam was quickly becoming one of the top-three problems facing CIO's - and billions of dollars were being spent to eliminate it. That's why I was so excited when Lucinda Duncalfe Holt introduced me to the TurnTide technology - because it provided a unique solution to a very large problem.

There are always risks in startup companies - technology risk, execution risk, financing risk, etc - but the risk I fear the most is market acceptance risk. By focusing on large, existing problems I hope to mitigate this risk. And if you are able to provide a unique solution, it increases the odds of a successful exit. When I find a great opportunity, I like to be the first money in - I'm not afraid of investing in pre- revenue companies.

2. Stick to what I know I tend to focus on companies and markets where I have a strong experience base and ability to add value. I reject more deals for this reason than any other. By only investing in what I know, it makes it much easier to evaluate a business concept -- I already have a clear understanding of the marketplace, competition and the financial dynamics of the industry. I also value simplicity and clarity - if it takes more than 5 minutes to get me excited about your business, you might be trying to do too many things.

3. Unique Business Model I look for companies that are able to leverage advances in distribution, technology or marketing to change industry economics or invent a new business model. I especially love investing in technologies and business models that are able to shrink existing markets - Microsoft did this extremely effectively to the encyclopedia industry with Encarta...and Half.com did the same thing to the publishing industry. If your company can take $5 of revenue from a competitor for every $1 you earn - let's talk!

4. Pull versus Push Marketing From a marketing perspective, I look for companies that are at a point of persuasion, not education - that use a "pull" versus push strategy for new products. It's really too difficult to educate a market or to try to change consumer behavior. I also think the marketing plan should be as creative as the product. Take our marketing strategy for Half.com. Mark Hughes and I worked together to convince Halfway, Oregon to rename itself Half.com as a marketing stunt. When they agreed, it instantly gave Half.com national publicity. Too many companies treat marketing and sales as a tactical afterthought. I believe marketing is strategic and seek companies that are marketing focused - with marketing requirements driving product development.

5. Experienced Leadership Beginners make a lot of mistakes. I spend a lot of time advising and mentoring first-time entrepreneurs - but I don't invest in them. (I call that tuition - not investment). The odds of success are much more in your favor as an investor with second-time entrepreneurs. Second-time entrepreneurs bear the scars of their first venture - and have learned their job on someone else's dime.